■ Helmut Panke had an intense gaze and a forceful personality. He
relished and encouraged debates during staff meetings, and he was admired
for his penetrating questioning. He would spend hours one-on-one with a
manager, working out in detail what the manager was to do, and then he
would let the manager work without further interference. It was
Panke's belief that working for Bayerische Motoren Werke (BMW;
Bavarian Motor Works) should be fun, and he created an atmosphere in which
employees could enjoy their work. Eloquent, Panke spoke flawless English.

Helmut Panke.

AP/Wide World Photos

.

PHYSICS

In Germany in the 1950s young people were expected to know if they were
destined for higher education or something else by the time they were 14
years old; Panke seemed to have known by age 11 when he entered Klenze
Gymnasium in Munich, leaving with the equivalent of a high-school degree
in 1966. He interrupted his studies at Klenze in 1964 when he received a
scholarship from the American Field Service to study at the Philips Exeter
Academy in Exeter, New Hampshire, where he received the equivalent of an
American high-school diploma in 1965.

After leaving Klenze, Panke attended the University of Munich, receiving a
bachelor of science degree in physics in 1968. He continued his studies at
the University of Munich, receiving a master's degree in physics in
1972 and a doctorate in nuclear engineering in 1976. Panke then held two
jobs from
1976 to 1978, one as a researcher in nuclear physics for the Swiss
Institute for Nuclear Research, and the other as a lecturer in physics for
the University of Munich. Panke would later hint that the attraction of
free enterprise lured him to become a consultant in 1978 for McKinsey
& Company, working in Düsseldorf and Munich. While working
for McKinsey, Panke was assigned as a consultant to BMW.

At the time BMW was primarily a local manufacturer of niche automobiles
designed for and sold to small groups of people with special demands for
exceptional performance. In 1977 BMW had begun manufacturing its 6 Series
coupe, which by 1982 was BMW's most successful model ever, selling
86,000 units by the time it ceased production in 1989 and broadening
BMW's appeal in the United States. On January 1, 1982, Panke was
hired by BMW to lead the planning and control office of the division for
research and development. BMW's corporate culture, which offered
the freedom to be creative, attracted Panke. Employees were responsible
for their own work, and managers could make decisions without having to
pass them through committees.

THE LEADER

About 47 percent of BMW was owned by the Quandt family, which ran BMW as a
family business, favoring longtime employees and stability. In the 1970s
there had been an attempt to kidnap the children of the family, and as a
consequence they became very secretive and remained so decades later. This
secretiveness seemed to pass on to BMW's corporate leaders. Panke
distinguished himself for his understanding of the complexities of
BMW's engineering research and manufacturing, and in 1985 he was
made leader of BMW's division for corporate planning. This would
make him a key figure in BMW's expansion in the 1980s and beyond.
While leading the division for corporate planning, he was instrumental in
pushing the idea that BMW should build a factory in the United States. In
1988 he became the leader of organization, responsible for coordinating
the activities of BMW's different divisions. In 1990 Panke became
leader of group planning for BMW, taking a hand in developing BMW's
long-term strategy.

Panke and colleagues visited the United States, searching for a place to
build an assembly plant. Panke drove through much of the eastern United
States, visiting many towns. After much fuss and debate, he and his
superiors settled on Spartan-burg, South Carolina. Fluent in English and
well versed in American business practices, Panke was an obvious choice to
lead BMW's U.S. expansion, and in April 1993 he took charge of BMW
(US) Holding Corporation as its chief executive officer (CEO) and chairman
of the board. Under Panke's leadership, the United States became
BMW's largest market, and the Spartanburg factory manufactured the
Z3 roadster for the United States and for export to Europe. Initially the
Z3s were so badly put together that they had to be scrapped, but
eventually the problems were fixed and the Z3 roadster became popular. In
July 1995 Panke was appointed BMW AG's
General-evollmäächtigten
, a word often translated as CEO in the English-speaking press, although
Panke's duties were more like those of an American chief operating
officer and lacked some of the authority that a CEO would be expected to
have.

In 1994 BMW had acquired the United Kingdom's ailing automobile
manufacturer Rover Group from British Aerospace for $1.27 billion.
BMW's chairman of the board, Bernd Pischetsrieder, hoped that
Rover's line of midsized automobiles would give BMW entry into the
automobile mass market; BMW had been the subject of takeover rumors, and
BMW's executive committee hoped that by increasing the
company's size, it would be able to remain independent. The German
press dubbed Rover Group the "English patient" because it
always seemed unhealthy.

UPPER MANAGEMENT

On July 4, 1996, Panke was elected to the executive committee of BMW,
placing him among the company's elite. There, he worked with the
Quandt family's representatives, as well as other shareholder and
management representatives. He had toured part of the United States with
Pischetsrieder, and the two were close allies as Pischetsrieder tried to
expand and reorganize BMW to become a truly global corporation.
Panke's duties were to supervise human resources and information
technology. He proved to be a wizard with the computers that became
essential to the manufacturing of BMWs, and his sheer enthusiasm for
BMW's automobiles helped make him a success with personnel.

In 1998 another English institution became part of BMW when the company
purchased Volkswagen's rights to the name
"Rolls-Royce," and BMW began to set up shop in West Sussex
to build new Rolls-Royces. In 1999 BMW's Spartanburg factory began
manufacturing BMW's first sport-utility vehicle, the X5; it had the
sharp handling that BMWs were famous for, and in spite of some misgivings
among industry analysts that the X5 would dilute the BMW brand by not
being a luxurious coupe, it became popular. Yet 1999 was a difficult year
for BMW. Having already lost $3.6 billion on Rover Group, BMWs finances
continued to be dragged down by its British subsidiary. To fix Rover
Group, Pischetsrieder had assigned scores of BMW's engineers,
including some of the best of BMW's next generation of future
leaders, to the United Kingdom, but only the Land Rover off-road vehicle
sold well.

By the start of 1999 BMW's executive committee had had enough. The
Quandt family exerted its control of corporate affairs, and on February 5,
1999, Pischetsrieder was fired. The executive committee then surprised
just about everyone when
it named committee member Joachim Milburg as the new chairman of the
board. Milburg had begun as an apprentice factory laborer, worked his way
up to become a college professor of engineering, and then accepted a
position with BMW in 1993. BMW's second in command, Wolfgang
Reitzle, quickly resigned after being passed over for the position.
Milburg accepted his new position, understanding that it was an interim
job because he would reach BMW's retirement age of 60 in 2003. He
quickly moved to rebuild BMW's upper management and appointed Panke
chief financial officer on March 18, 1999.

Panke proved to be a wizard at finances, but he could not help Rover
Group, which lost another $1 billion during 1999. Although Milburg was
full of ideas to make Rover Group profitable, Panke viewed the company as
a lost cause. When Rover Group was finally sold, journalists believed that
Panke was primarily responsible for the sale. In 2000 the Land Rover was
sold to Ford Motor Company for $3 billion. The rest of Rover Group was
sold on March 16, 2000, to Alchemy Partners, a group of venture
capitalists, for £10. BMW quickly became the subject of takeover
bids, because by dropping Rover Group its annual sales would fall by about
400,000 vehicles, thus reducing its gross sales and ability to compete in
the mass market. Yet Milburg defiantly maintained that BMW would remain
independent. He took on responsibilities for marketing, and to help him
with this he made Panke his codirector of marketing.

BMW had lost many of its most promising engineers and managers in the
Rover Group disaster, but neither Milburg nor Panke panicked. Panke was
especially gifted at attracting promising young leaders, and BMW retained
its corporate culture of allowing employees great latitude in making
decisions, maintaining a creative atmosphere that attracted young talent.
Regardless of his job titles, Panke was plainly second in command at BMW.
His outgoing style complemented the quiet, reticent Milburg, and the two
formed a good relationship.

RECOVERY

Milburg and Panke emphasized BMW's brand name in advertising,
noting the brand's reputation for building sharp-handling cars for
automobile enthusiasts. They set about reorganizing BMW, putting aside
aspirations to enter the mass market in favor of satisfying niche groups
of customers. This involved reorganizing and in some cases retooling BMW
factories to make them flexible enough to shift rapidly from manufacturing
one model to another as market demands fluctuated. Further, the two men
planned to expand BMW's offerings from a few models, each with
several variations, to several models, each customizable to a
customer's specifications. Panke would eventually push this to its
limit by offering personalized automobiles. For 2000 BMW grossed $31
billion and netted $940 million.

By 2001 BMW had plans to spend $23 billion to expand its offerings, hoping
to increase sales 40 percent by 2008. It opened an engine plant in
Birmingham, England, to manufacture four-cylinder engines. In Oxford,
England, BMW began manufacturing the Mini, a luxury small car. There was
nattering in the press about a small car diluting the BMW brand name, but
the Mini had all of BMW's special-handling traits. In July 2001 BMW
announced its intention to build a new factory in Leipzig, which would
begin manufacturing the 3 Series in 2005. The German government promised
to help fund the building of the factory because it would help the economy
of the former East Germany. Then the X5 off-road BMW sport-utility vehicle
was launched, becoming a hit in the United States. BMW spent $350 million
to upgrade its U.S. dealerships.

The introduction of the 7 Series line of high-end luxury vehicles in
November 2001 was crucial to BMW's future. The 7 Series competed
with and was intended to take a share of the U.S. market from Lexus and
Mercedes. The iDrive computer system was introduced. It displayed data on
a screen on the 5 Series and 7 Series dashboards, synthesizing data on
weather conditions, radio preferences, telephone communications, and
navigation, and was controlled by a knob near the gearshift. Automobile
reviewers declared the iDrive a confusing mess, but Panke defended it as a
valuable feature. The iDrive suffered numerous glitches, causing buyers to
return their automobiles to dealers for repairs. Panke had a team of
engineers rework and simplify the iDrive's software, and by 2002 it
functioned well. In 2001 two-thirds of BMW owners were repeat buyers, and
the company netted $2.8 billion, more than the combined nets of
DaimlerChrysler and General Motors.

CHAIRMAN OF THE BOARD

On December 5, 2001, Milburg announced that he would retire early in May
2002 because of an ailing back. He and the other executive committee
members knew already who they wanted to be the new chairman of the board,
and Panke was named Milburg's replacement almost immediately.

The 7 Series was designed by an American, Chris Bangle. It included a
large trunk that some reviewers thought was too chunky, but it gave the 7
Series a muscular look, which went well with its powerful engine and
road-hugging ability. The engine was part of an effort to be more
efficient at BMW. Panke felt that buyers were not choosing different
models of BMW because of the engine differences, and so the V-6 engine was
installed in several different models. On the other hand, Panke thought
that interior design mattered very much to consumers.
He said that he wanted people to be able to sit blindfolded in a BMW and
know by the smell and feel that they were in a BMW and no other kind of
automobile. He was selling high-quality engineering and style, and the 7
Series retained the feel of a BMW while offering an up-to-date look.

On May 16, 2002, Panke became chairman of the board. Though he was often
referred to in the English-speaking press as a CEO, technically he chaired
the board, which at BMW carried the authority that both chairman of the
board and CEO would carry in an American company. He strove to develop a
corporate culture that was fun, even exciting, which was even spelled out
in BMW's code of corporate behavior: "Rule 7 states that
it's the responsibility of any manager to create an atmosphere of
fun in the organization," said Panke (
BusinessWeek online
, June 9, 2003). Flexibility was an important part of the culture. Not
only would BMW factories be able to shift from manufacturing one model to
another according to consumer demand, but the factories would be able to
tailor individual vehicles to individual consumers with a multitude of
options, some of which were developed out of the creative atmosphere Panke
promoted. For example, BMW developed keys that were individualized for
different drivers of the same automobile. Each individual key would
automatically set the radio, driver's seat, climate control,
steering wheel, and other options to the driver's preset
preferences.

All BMWs sold at the high end of their classes in 2002, with the sporty 3
Series starting at $28,495, the medium-sized 5 Series at $38,205, and the
luxury 7 Series at $69,195, and with all usually selling for much more
because of numerous options added by purchasers, giving BMW the highest
profit margins in the industry. Panke rejected the idea that to survive
BMW had to penetrate the mass market. Instead, he emphasized qualities
that set BMWs apart from other automobiles to attract people willing to
pay more for a vehicle that could be customized to suit them in just a few
weeks. A somewhat awkward consequence of the drive for flexibility was
that BMW had over three hundred different time schedules for employees,
varying with the factory and the model being manufactured.

Panke and BMW reached an agreement with Toyota Motor Corporation to
jointly manufacture diesel engines, even as BMW overtook Toyota's
Lexus in sales in the United States. While the automobile-manufacturing
industry as a whole was in a slump, BMW's worldwide sales grew 17
percent, reaching 1.05 million vehicles. BMW was ranked 81st on the
Forbes
list of the world's top 500 companies. In a tough market, Panke
warned, "We have to remain hungry and to keep up our desire to
outperform others" (
Forbes.com
, July 22, 2002).

Few people could have been happier in their jobs than Panke was in his.
The pleasure he took in his work was evident to insiders and observers
alike. In 2003 BMW finished building a new factory in Britain for
Rolls-Royce Motor Cars and began producing Phantoms, which sold for
$320,000. The Phantom featured a 12-cylinder engine designed and built by
BMW. A new version of the 5 Series was introduced, with longer bodies and
an upgraded iDrive system. Safety features included standard side-door air
bags. The 6 Series and the X3 Baby sport-utility vehicle were introduced
in 2003. Panke took to calling customers "investors,"
probably to emphasize the high resale value that BMWs typically carried.
The worldwide decline in automobile manufacturing affected BMW, however,
and even though BMW upped its manufacturing total to 1.1 million vehicles,
most of the increase in sales came from its small-car series. Its gross
for the year declined 2.1 percent, and its net declined 3.6 percent,
although at $2.3 billion the net was enviable.

In May 2004 BMW opened a factory in Shenyang, Liaoning province, China.
The factory was owned jointly with Brilliance China Automotive Holdings
and produced 3 Series and 5 Series automobiles. Panke hoped the Chinese
factory would do for BMW in China what the factory in Spartanburg had done
for BMW in the United States. On June 7, 2004, Panke was named the leading
foreign "star manager" by
BusinessWeek
, and on June 26, 2004, he was named Advertiser of the Year at the Cannes
Lions International Advertising Festival. He had big plans, including the
launch of a new luxury 6 Series coupe and the launch of the 1 Series, a
small BMW for young customers who would one-day be able to buy bigger
BMWs. "When people work in a fun atmosphere it's very
motivating. I love my job," Panke told an interviewer in 2003 (
BusinessWeek online
, June 9, 2003). He had created a culture in which people throughout the
corporate ranks could send questions all the way to the top, in which
debate and new ideas were encouraged. Panke dealt with the tough questions
that arose, but he insisted that "My biggest challenge is saying
'no' to projects that are exciting but don't fit
BMW's strategy" (
BusinessWeek
, June 7, 2004). His strategy was to make sure every BMW fit the
brand's image.

See also
entry on Bayerische Motoren Werke in
International Directory of Company Histories
.